What year does Ben Stein think that he’s in? On the one hand, he talks about "President Obama" in his latest column, so he must have some inkling that it’s 2009. But his overall message is very mid-2007: there’s a big financial credit crunch which needs fixing, but the broader economy is actually not so bad, and so long as we can fix the problems in the banking system, everything should be fine.
Maybe nobody’s told Stein that we’ve been in recession since December 2007, that we’ve lost 3.6 million jobs, that GDP is shrinking faster than ever, and that the Obama stimulus package is designed to keep the broader economy from cratering catastrophically.
Indeed, Stein seems to have no comprehension of the difference between the economy-focused stimulus plan, on the one hand, and the policies, to be announced on Tuesday, which will focus specifically on the financial sector, on the other:
But the main crisis now is not unemployment, at least not yet. It is about the lending institutions of this country…
What is the solution? With the greatest respect to President Obama, it is not necessarily to hire men and women to build more wind-power windmills, or “21st-century classrooms.” These plans may have merit in and of themselves. But they do not get at the central problem: credit…
I do not doubt that much of what Mr. Obama now proposes has merit for reasons having little to do with the economic situation. But right now, this minute, we are in a financial-monetary crisis. It is begging for a financial-monetary solution, not mammoth public works, which might be useful down the road.
Ben, there is "a financial-monetary solution", and one which makes a lot more sense than the one you’re proposing. It’s coming next week, and it’s going to be announced by the Treasury secretary, Tim Geithner. The "mammoth public works" — the windmills and classrooms and what have you — are not designed to solve the financial crisis; instead, they’re designed to provide a Keynsian stimulus to the economy as a whole. You can disagree about how much of a stimulus such a bill will provide, but arguing that it doesn’t address the problem of credit simply misses the whole point of the bill: the government’s response to the problem of credit is a separate thing entirely.
The rest of Stein’s column is a hodge-podge of ideas — if they can be called that — recycled from previous columns, without even any attempt to keep them consistent:
The financial entities of this great nation — both banks and less regulated or unregulated entities — took wild, spectacular, immoral risks with credit.
It turned out that shrewd speculators could take advantage of those mistakes when the credit bubble burst and make extraordinary sums of money, all the while terrifying markets and making the crisis worse…
Now it’s been revealed that as bad as the credit losses of banks and other entities were first thought, they are actually worse.
Today, the lenders’ problem is that their losses have been so great as to impair their capital…
The solution is to lend the banks more federal money…
As I have been suggesting for a while now, we should also start making guarantees on bank loans, absent fraud, and make sure the banks have no excuse not to lend.
This is like one of those poems with an ABBCCA rhyme scheme, only instead of rhymes you have outright contradictions.
If the problem was financial institutions taking "wild, spectacular, immoral risks with credit", then the solution can hardly to guarantee all bank loans so that "the banks have no excuse not to lend".
If "speculators" made the crisis worse by "terrifying markets" to the point at which the credit markets overshot to the downside, then credit losses can’t be "actually worse" than markets implied at first.
And if bank losses "have been so great as to impair their capital", that means that banks’ liabilities are far too big relative to their assets, and the solution cannot possibly be "to lend the banks more federal money" and thereby increase the banks’ liabilities even further.
On the other hand, maybe Stein was a bit muddled this week from all the attention he’s receiving from the "chicks" who "dig" him. And if you think that all sounds very 70s, just wait until you see the cover art for his 1982 book, ‘Ludes. It might be 27 years old, but some things never change. Here’s the review (by Cameron Crowe, no less):
‘ ‘Ludes,” unfortunately, is also about restaurants. In the process of telling Lenny Brown’s story, Mr. Stein manages to mention almost every exclusive restaurant in Los Angeles. It often seems that all the important conversations in the book take place over meals at Ma Maison, the Moustache Cafe, La Scala, the Palm or Le Restaurant…
Perhaps in his next book, Benjamin Stein might consider traveling a little farther than Restaurant Row.
Nah, he just moved the restaurant name-dropping from books to newspaper columns.